Money in Market Clearing

Abstract

Market clearing is the central issue in macroeconomics, Tm centuries of debate on Say's law indicates that the issue is not yet settled. This essay proposes that double coincidence is a necessary condition for market clearing, in addition to the^qualih’ of demand and supply at equilibrium prices. However, -the literature doesi Uot recognize, necessity' of double coincidence. jevans (1875j gave shape to the conventional wisdom on double coincidence. The idea is that it is peculiar to barter, and that money overcomes this inconvenience. This is a fallacy. It prevents the development of a theory of money cis a necessary medium of indirect exchange. It hides the rule of money in market clearing. By recognizing double coincidence as a necessary condition for any trade, and the role tiff- money in market clearing, economics am became a much stronger and practically mere useful science. Monetary reform can correct the perverse circulation of money and prevent involuntary unemployment, undue instability, and.excess debt.